Thanks to a tip from a reader, we found that Groupon's Deal of the Day got a bit illegal over the weekend. The flash sale site of gift certificates serves more than 150 markets with deals that range from apparel and jewelry to spa packages, flight lessons, and even to discounted cell phone covers, which brings us to this weekend's deal: $25 for $150 Worth of iPhone Accessories from The Smartphone Mall. A quick look into what online retailer, The Smartphone Mall, offers reveals an array of standard iPhone covers but more interestingly, "fashion" covers, aka covers that infringe the trademarks (and in some cases, the copyrights) of Louis Vuitton, Gucci and Chanel (if you're curious about the legality of those "Chanel" nail polish cases, more about that HERE). In case you didn't know, you generally cannot legally take another party's logo and put it on your products, especially when that other party has federally registered trademarks that extend to cell phone accessories. And in line with a recent trends in case law dealing with infringement and the related liability, Groupon may be partially to blame here for the wrongs of The Smartphone Mall.
Without going into detail now (I may in a future post), recent cases dealing with the contributory and vicarious liability associated with trademark infringement have been ever-expanding the potential pool of defendants in these types of cases. Web-hosting services, flea market owners, and online marketplace hosts have been held liable on trademark infringement grounds in connection with high fashion brands, in addition to the individual sellers and/or website owners/operators themselves.
Essentially, the take away from most of these cases is this: A secondary party may be held contributorily liable "if it knows or 'has reason to know' that [the other entity selling infringing goods] is selling infringing goods."
As for vicarious liability, the website or flea market owner does not need to have actual knowledge that its vendor/advertiser/client is selling infringing goods. In lieu of knowledge, the secondary party, Groupon in this case, must have control over the individual sellers and receive a direct financial benefit. Based on this language alone, it may not be a total stretch for Louis Vuitton or Gucci's lawyers to fit Groupon into one of these roles.
Groupon's services are two-fold. It is essentially an advertising service, marketing itself as having "built the world's largest local marketplace," and as a result, "nothing delivers customers with the speed, reach, and power of a Groupon campaign." Thus, the services that Groupon offers to its clients (as distinct from the individual buyers of the daily deal juice cleanse packages) are not terribly different from those businesses that advertise on Facebook. At the same time, individuals are able to buy an array of products directly from the Groupon site (and not just a discounted gift card to a store), and as a result, Groupon is subject to a level of liability, even if those goods are not its own brand name. eBay knows a thing or two about this type of liability, as its been sued a number of times for selling counterfeit goods that are not its own and that its not actually selling on its own, but is merely hosting on its online marketplace.
If we are looking at Groupon as a potential defendant (assuming that there is ever a lawsuit, which as of now there isn't) in comparison to eBay, there is one thing that Groupon does that eBay doesn't: Groupon curates the products and services available for purchase on its site. When Groupon CEO Andrew Mason spoke about comparisons between Groupon and Amazon, he said: "We’ll never be about comprehensive product selection, but our skills at curating unbeatable offers are clearly resonating with our customers." This point alone could be the source of some blame for Groupon. By "curating" its selection of goods and services (as distinct from online marketplaces, such as eBay, in which anyone can sign up and sell real or counterfeit goods), Groupon is inherently saying that it carefully selects which businesses (and thus, which goods and services) appear on its site.
So, while you can't actually buy the counterfeit Louis Vuitton iPhone cases on Groupon, as you are just buying a $150 gift certificate for The Smartphone Mall for $25 from Groupon (and then you may choose to buy a fake Louis Vuitton iPhone cover), I think it is probably a stretch to say that Groupon is not, in some way, responsible for promoting such sales. Because, if Groupon does, in fact, live up to its word of "curating" the goods that appear on its site, this very likely assumes that they looked into what it is that The Smartphone Mall is selling, no? One thing that would certainly make the case against Groupon easier: if they were displaying the photos of the fake LV and Gucci iPhone cases on the Groupon site, but that would just be too easy!